Select the correct sequence that lead to the need for the introduction of New Economic policy 1991 in India :

(A) Foreign exchange reserves dropped

(B) World Bank gave loan to manage crisis

(C) New economic policy 1991 announced

(D) India met with an economic crisis related to external debt

Choose the correct answer from the options given below :

(D), (A), (B), (C)

The correct answer is option (2) : (D), (A), (B), (C)

(D) India met with an economic crisis related to external debt

(A) Foreign exchange reserves dropped

(B) World Bank gave loan to manage crisis

(C) New economic policy 1991 announced

In 1991, India met with an economic crisis relating to its external debt — the government was not able to make repayments on its borrowings from abroad; foreign exchange reserves , which we generally maintain to import petroleum and other important items, dropped to levels that were not sufficient for even a fortnight. The crisis was further compounded by rising prices of essential goods. All these led the government to introduce a new set of policy measures which changed the direction of our developmental strategies.

India approached the International Bank for Reconstruction and Development (IBRD), popularly known as World Bank and the International Monetary Fund (IMF), and received $7 billion as loan to manage the crisis. For availing the loan, these international agencies expected India to liberalise and open up the economy by removing restrictions on the private sector, reduce the role of the government in many areas and remove trade restrictions between India and other countries. India agreed to the conditionalities of World Bank and IMF and announced the New Economic Policy (NEP). The NEP consisted of wide ranging economic reforms.